"The assumption is that the U.S. economy is going to continue to grow, albeit at a slow pace," said Art Hogan, managing director at Lazard Capital Markets. "But the main concern for the market since September has been Europe, and that continues to be the case today."

The euro was under pressure, breaching the key $1.30 level against the dollar and falling to its lowest level since mid-January.

The sell-off came as investors anticipated further interest rate cuts from the European Central Bank, which lowered its benchmark rate to 1% earlier this month.

Most European Union leaders have agreed in theory to form a fiscal compact aimed at strengthening budgetary discipline. But many investors say implementing the agreement could prove legally and politically difficult.

On Tuesday, stocks pulled back after a report said that German Chancellor Angela Merkel rejected suggestions to raise the funding limit for the European Stability Mechanism -- or ESM, which currently stands at €500 billion.

Shares of Avon Products (AVP, Fortune 500) soared after the company announced it started a hunt for a new CEO and move its current chief executive into the executive chairman role.

Shares of electronics retailer Best Buy (BBY, Fortune 500) held steady after it got slammed Tuesday. Its quarterly earnings fell far short of forecasts.

Netflix's (NFLX) stock continued its nosedive from Tuesday, after spiking Monday on chatter that the company could be acquired by Verizon (VZ, Fortune 500). A spokesman for Netflix said the company doesn't comment on speculation.